INTERVIEW-Nigeria sees slower inflation rate this year as economy grows

Chijioke Ohuocha

Published 11:14 AM ET Tue, 16 Jan 2018
Reuters

ABUJA, Jan 16 (Reuters) - Nigeria expects the rate of inflation to fall faster this year compared with 2017, banking on the economy and currency to stabilize, but activities leading up to presidential elections next year could stoke prices.

Yemi Kale, head of the National Bureau of Statistics (NBS) told Reuters the country met its inflation target last year as projected in a reform document meant to get the economy growing again after a recession in 2016.

Nigeria's inflation slowed for the 11th month in a row in December, to 15.37 percent from 15.90 percent a month before.

Kale expects prices to continue to drop.

"We are getting back to more predictable rates of inflation based on consumption; harvest and planting seasons rather than cost-push factors," Kale told Reuters in an interview in Abuja

"I expect inflation to slow between now and mid-2018."

Pre-election spending could stoke prices, however, he said.

Nigeria will hold presidential elections on Feb. 16, 2019 and political parties have between Aug. 18 and Oct. 7 this year, to select their candidates.

In October, Central Bank Governor Godwin Emefiele said he expected inflation rates to fall at a faster pace and reach the high single-digits by the middle of 2018.

The central bank has kept its main interest rate at 14 percent for over a year now as it battles inflation and seeks to attract foreign investors to support the naira.

However, the government wants to see rates come down to lower its borrowing costs and stimulate the economy.

"FX rate is stable and the impact on inflation is much stable, which means that the central bank's ability to depend the naira has increased," he said

However, food price index have remained in high double digits. It declined to 19.42 percent in December from 20.30 percent in November.

Kale said the country was in a harvest period and output is increasing which would help lower food prices. But added that household consumption was still fragile after the recession.

"If oil price is maintained and the exchange rate is stable then consumption expenditure will improve. We don't see any immediate risk to oil production and oil price seems way above the budget benchmark price, all that points to stronger GDP numbers," he added.

The International Monetary Fund (IMF) has forecasted a GDP growth of 2.5 percent for Nigeria this year. Kale said that was doable.